Q1 2023 Daseke Inc Earnings Call
Good morning, everyone and thank you for joining today's conference call to discuss dusky final financial results for the first quarter ended March 31 2023.
With us today are Jonathan Shopko, Chief Executive Officer, and Board member, Eric Kelly Executive Vice President and Chief Financial Officer, and Adrian Griffin, Vice President of Investor Relations and Treasurer.
After their prepared remarks, the management team will open the call for question and answer session.
As a reminder, you may now download a PDF of the presentation slides that will accompany the remarks made on today's conference call as indicated in the press release issued earlier today.
You may access these slides in the Investor Relations section of the dusk use website.
I would like to now turn the call over to Adrian <unk>, who will read the company's safe Harbor statement that provides important cautions regarding forward looking statements within the meaning of the private Securities Litigation Reform Act of like 90 days Aegean. Please go ahead.
Thank you Ms Kayla and good morning, everyone Slide two of today's presentation contains our safe Harbor and non-GAAP statements. Today's presentation. Also contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
<unk> financial information, including our guidance outlook are forward looking statements forward looking statements, including those with respect to revenue earnings performance strategies prospects and other aspects of <unk> business are based on managements current estimates projections and assumptions.
The risks and uncertainties that could cause actual results to differ materially from our expectations and projections I encourage you to read our filings with the security and Exchange Commission for a discussion of the risks that can affect our business and not to place undue reliance on any forward looking statements. We undertake no obligation to revise our forward looking statement.
To reflect events or circumstances occurring after today, whether as a result of new information future events or otherwise, except as may be required under applicable securities law. During the call. There will also be a discussion of some items that do not conform to U S generally accepted accounting principles or GAAP, including and not limited to.
Adjusted EBITDA adjusted EBITDA margin adjusted operating ratio adjusted operating income adjusted net income or loss and free cash flow reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the Investor presentation and press release issued this morning, both of which are available on the.
Investors tab of the dusky website www dot dot dot com in terms of the structure of our call today I will start by turning the call over to Jonathan Shopko, who will review our business operations and the progress we're making as we execute against our key strategic priorities are in coli will then provide an update on our recent capital.
Actions and our first quarter results, Jonathan will conclude our prepared remarks with an updated 2023 outlook before we open the line for your questions with that I'll hand, the call over to Jonathan.
Good morning, everyone and thank you for joining our call today.
At this point in this quarter's reporting cycle, it's likely no surprise, our listeners that our industry is facing weaker demand than many of us were forecasting at the beginning of this year.
Smaller operators are experiencing near breakeven spot rates, prompting an exit of capacity from the industry with net relocations, maintaining a record high levels. While at the same time remaining capacity is being reallocated into the strongest end markets, resulting in rate pressure across nearly every industry sub vertical.
Compound list with persistent inflationary headwinds, most notably maintenance cost in driver pay.
The driver pay typically lagging in response to the prevailing rate environment.
Cumulative effect of weaker demand lower prices and inflationary headwinds set the backdrop for what is framing up to be a challenging year.
Yes.
Despite the strained lease current challenges placed on our sector's fundamentals I'd like to conduct contextualize, where we're at as a company.
<unk> 2022 was a record year for them it.
It was notably the third consecutive year of record financial performance for our company demonstrate.
Demonstrating the initial success of our transformation efforts.
They are preparing us for this year's challenges.
Despite a drastically different rate environment. This first quarter of 2023.
We reported a favorable $46 8 million of adjusted EBITDA.
In fact this was the second best adjusted EBITDA print for the first quarter in our company's history.
And only $2 8 million shy of our record achieved in the more frothy first quarter of 2022.
Next I'd like to point out the cross cycle durability of our operations.
Which is functioning as designed within our flatbed segment, which generally experiences more volatility and slower freight environments.
We noted several positive indicators, including relatively flat load count with an increased length of haul.
Increased percentage of company load miles as a percentage of total miles and reduce dead head each of which helped US drive adjusted EBITDA margin improvement as compared to not only the first quarter of 2022, but also the fourth quarter of 2022.
These productivity improvements helped to stave off the full impact of the rate declines versus the prior year period.
During the first quarter of 2023, our specialized segment delivered adjusted EBITDA and adjusted EBITDA margin flat to the prior year quarter, a substantial accomplishment in light of the macro environment.
Lastly, I'd like to highlight the idiosyncratic opportunities still available to <unk> as we.
With our transformation.
In my recent letter to shareholders. We introduced the name of these collective transformational work streams as wanted to ask you.
Wanted to ask you will leverage technology and facilitate the sharing of best practices, while creating a more cost efficient durable business model that consistently delivers profitable growth across future cycles.
It's a series of initiatives intended to unite the teams across the company around the culture of close coordination and continuous improvement.
We are re sequencing our transformation initiatives to pull forward. These system deployments and extend out the operating subsidiary integrations to improve the efficiency of the integration process and the traction and the traction of the post integration efforts, providing more sustainable long term cost and revenue synergies.
Over the coming quarters, we continue to expect these initiatives will provide cumulative incremental operating income in excess of $25 million with.
With additional cost and revenue synergy opportunities still available thereafter, as we focus on the optimization of our business.
While we do expect our <unk> efforts to partially offset the collective headwinds in 2023.
Still contributed approximately $15 million and.
In support of adjusted EBITDA as referenced on our last earnings call.
Our re sequencing of these work streams is expected to shift realization of the totality of these run rate synergies slightly from late 2023 to mid 2024.
With that I'll hand, the call over to Eric before closing our prepared remarks Eric.
Thank you Jonathan and good morning, everyone. In February we establish a target gross leverage of one and a half to two times total debt to adjusted EBITDA for normalized ongoing operations. After quarter end, we took decisive action towards this goal paying off $50 million of long term debt balance with cash on hand.
Cutting and interest expense associated with $50 million of long term debt and reducing our pro forma gross leverage from 288 times to 266 times.
And Additionally, we also used $20 million of cash on hand to redeem the entire class of series B. One preferred shares that were receiving that 13% cash dividend, that's eliminating $2 6 million of annual dividend payments. These combined actions improved first quarter adjusted EPS by <unk> <unk>.
On a pro forma basis or 11 since annualized pro forma for these transactions. We have maintained a healthy level of available liquidity at $95 $6 million, including a cash balance of $91 million and 100 $104 6 million.
Availability under our Undrawn revolving credit facility, we will continue evaluating opportunities for additional outsized repayments to reduce gross leverage further improving the risk adjusted return for current and prospective shareholders.
Jonathan mentioned in his opening remarks, the first quarter of this year was characterized by an environment of softening freight demand and lower all lower overall freight rates and while we were not immune to these headwinds our asset right model moderated the impacts.
So remind our listeners that first quarter of 2022 was the highest ever first quarter adjusted EBITDA for the company. The current year quarter consolidated revenue declined by $21 1 million or 5% to 3300 99.
$8 million the decline was due to a $17 6 million reduction in brokerage revenue all of which was contained within our flatbed segment as well as $17 $6 million reduction in the owner operator freight as we continue to focus on loading higher margin company owned assets and improving utilization for our entire.
Company owned fleet.
The intentional shift afforded by our model allowed us to capture an additional $4 3 million of company freight revenue with better margin pull through partially offset.
In the brokerage and owner operator declines.
We realized continued demand strength in agriculture, and high security cargo end markets due to the non correlated relationship of agricultural equipment deliveries and since sensitive cargo transport to the broader industrial economy offset by a decrease in construction end market symptomatic of the impacts.
A higher interest rate environment and a degree of continued economic uncertainty.
Compared to our record first quarter of 2022, our adjusted operating ratio increased slightly by 120 basis points to 93, 4% as total operating expenses fell more slowly than revenue.
While overall expenses were lower we realized increases in salaries wages and benefits and operations and maintenance expense.
Pressured margin.
Over the next several quarters. However, we expect these expenses will begin to reflect the changing dynamics of the current cycle.
Transitioning now to net income in the current year quarter net income was half a million or five cents per loss per diluted common share compared to the prior quarter of $13 million or <unk> 18 cents of earnings per diluted share $7 2 million of the comparative period.
Net income decline related to the exploration of warrants in the prior quarter that did not reoccur and incremental net interest expense, resulting from rising floating interest rates on a flat absolute quantum of debt.
Regarding EPS approximately 19 cents of compared to period decline related to the increased net interest expense and the exploration of warrants previously mentioned.
As well as $1 $5 million in cash dividends associated with the series B.
The preferred shares that were issued in November of 2022 in connection with the founders share repurchase.
Spite these headwinds adjusted EBITDA was $46 8 million and adjusted EBITDA margin was 34 or 13, 4% representing a modest improvement in margin from 13, 2% in the prior year quarter.
As a final highlight of our consolidated results, we generated free cash flow of $33 7 million nearly $3 million more than the prior year quarter a significant.
<unk> in a difficult environment.
Turning now to our specialized solutions segment.
Revenue was $230 7 million or one 8% improvement versus the prior year as our team prioritized loading higher margin company owned assets through these efforts company freight revenue increased slightly as a 5% increase in miles outpaced a decline in the company rate per mile.
<unk> <unk>.
Demand strength in agricultural and energy end markets added to revenue growth as well as the contribution from the hazardous waste focused S. J transportation acquisition, which was completed late in the prior year quarter. These.
These gains were partially offset by declines in the construction and manufacturing end markets. Overall, the specialized segment recorded approximately flat miles a slight decline of one 5% and average rate per mile to $3 31.
In our segment adjusted.
That was roughly flat at 92, 4% in the first quarter of 2023, netting Tom increased to $2 1 million from $6 2 million in the prior year quarter, primarily due to increased interest expense finally, adjusted EBITDA and adjusted EBITDA margin.
Creased slightly to $27 9 million or 13, 6%, we're very pleased with the financial and operational performance of this segment during a difficult quarter.
Turning now to our flatbed solutions segment, the first quarter demonstrates the adaptability of our asset right strategy in an environment with nine 3% lower rates and roughly half the flatbed loads are available in the market versus this time last year, our team shifted priority to loading higher margin company assets.
Which generated an increase in company freight revenue of eight 7% due to a nearly 21% increase in company miles driven as compared to seven six fewer miles driven by owner operators.
The result of these movements with segment revenue of $169 1 million at $25 $3 million lower than the prior year quarter, primarily due to a $17 $7 million decline in brokerage revenue.
With the industrial end markets, we serve strengthened the manufacturing end market was more than offset by declines in steel and construction end markets flatbed solutions adjusted or was 94, 8% primarily due to lower revenue.
Segment, adjusted EBITDA was $18 9 million with adjusted EBITA margin, improving slightly from both the prior period quarter and sequential quarter to 13, 2%.
Though improved operational and productivity efforts by our RF.
Flatbed teams looking at these results our asset light operating model is working as designed we are concentrating on our efforts on enhancing productivity.
Which we expect to improve across the year ill now turn the call back to Jonathan for an update and our 2023 outlook Jonathan.
Jonathan Thank you Eric.
While our organization successfully navigated a difficult first quarter and the remainder of 2023.
We now anticipate a delayed recovery in freight demand.
It is likely to attenuate the seasonal uplift in rates and volumes typically realized in our second and third quarters compounded by revised rate expectations for the remainder of the year that our 1% to 2% lower than those forecast at the beginning of 2023, which appear to be well aligned with the adjustments made by the broader industry.
If these expectations prevail, we anticipate full year 2023, adjusted EBITDA in the range of $210 million to $220 million, which is 6% to 11% below our previous guidance of $235 million and again is generally consistent with the recalibration as announced by most of our truckload peers this quarter.
A return to stronger supply and demand fundamentals, including rates seasonality or economic recovery, along with our continuing cost and revenue optimization initiatives could positively influence our ultimate financial performance.
Our organic capital expenditures net of property and equipment sales are expected to be 135 million to $145 million.
As compared to an original outlook of $145 million to $155 million we.
We believe consistent disciplined reinvestment in our fleet is imperative across all cycles to enhance the driver experience reduce future operating expenses and prepare our fleet for increasing profitability. Our fleet utilization is improving and our driver recruiting classes are the largest we've had in recent history.
Further positioning us to outperform through the early stage of recovery over the next cycle.
In this environment, we are investing in the technology and processes to support profitable growth in the up cycle, while prudently managing near term controllable costs and reallocating resources to accelerate performance in this current environment.
Our <unk> efforts will not only augment the resilience and efficiency of the model with technology best practice continuous improvement.
But they will support the foundation of a new high watermark at our earnings profile when the cycle inevitably in flex.
Throughout our organization, we are fortunate to have leadership that knows how to operate with excellence in this environment.
A team that can channel list across the near term challenges through the execution of our long term strategy.
While compounding growth at attractive returns.
Now, we will turn the call back to the operator and take your questions.
Thank you at this time, we will conduct a question and answer session to ask a question you will need to press Star One line on your telephone and wait for your name.
To be announced to withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Susan from Stifel.
Your line is now open.
Great. Thanks, good morning.
Good morning Bert.
Hey, Jonathan.
Maybe just thinking a little bit about where you left off on the on the guidance side of things.
The risk do you think the new EBITDA range is I think if you were to end the year like 2023 in that range.
<unk> generally view that pretty favorably, but there seems to be probably some concern there is more downside.
Are you evaluating the bear case at this stage now five plus months into the year.
Yes, I think look.
A lot of there's a lot of data points out there that we're looking at we're looking at low to truck ratios utilization, we're looking at normal seasonality trends.
And look it's frankly, frankly, a mixed bag, we ultimately took the revision.
Downward because of the lack of a lack of seasonality.
We typically we typically by April really see a noticeable uptick in.
And utilization loaded trucks, even rates to me typically rates from March to April increased 10% to 15%.
And when you think about our Q2 and Q3 because of the seasonality of those two quarters being on trend for us.
60% of our EBITDA is generated during those two quarters, so really important quarters for us.
And we're just not really we're just not really seeing the seasonal uplift and so we've kind of looked at look we've looked at looked.
<unk> looked at our peers, we looked at industry.
And the industry data and based on customer feedback as well in recent discussions around.
Pricing contracts and things like that we've look we've taken our guide down and it's based on as I said in the call kind of a 1% to 2% further degradation in rates. We've also we have assumed a little bit of an uptick in firming up and volumes, which we are actually seeing a little bit of improvement in <unk>.
Volumes, but it's not such a pronounced improvement that we get hand back with with the shippers whereby we can we can really we can really drive rate increases at this point, so we think that.
The seasonality.
Might be there at some level, it's just not simply going to be as pronounced as we typically see so.
And we feel we feel pretty good about that guidance. So far we've also got the integration efforts. The transformation efforts that are underway and those are those are those are performing as expected.
So we do have some things going for us.
Loads hold we think we continue to drive I mean, you saw this quarter the southeast flatbed segment.
Really was able to drive productivity and improve productivity, which does a lot to offset rates and we think that will continue if the if the freight holds but.
At the end of the day, we're not economists.
We're not soothsayers. So we're doing the best we can with the with the data we have in front of us today.
That's great Super helpful.
On the self help cost initiatives side of things can you sort of highlight what's factored into the two.
10 to 220 guide for this year and what you ultimately think you can drive in 2024.
Yes.
We are thinking about that bird is.
<unk> got so last year, we really commences.
These transformation efforts last year, but we said.
The costs were going to largely offset any any noticeable benefit from those from those efforts. We think a lot of those a lot of those costs.
Have kind of kind of dissipated so we kind of entered the year with probably roughly $5 million.
The benefit from the initiatives that we undertook last year and we expect to get an incremental $10 million. This year. So we're thinking about $15 million of of of improvements of synergies related to those transformation efforts that we'd realize this year with probably something that feels like an exit run rate in the high teens.
And then and then going into 2024, we think there's another $10 million on the table. So a total of 25 cumulative 25, probably an exit run rate that feels quite closer to 30% exiting 2024, so a little bit of upside to what we've been we've been telling the market but.
We think timing as I said on the prepared remarks timing has shifted a little bit to pull forward. Some of the systems implementations, which we think are kind of the long pole in the tent here.
Primarily around the Tms kind of the lifeblood of these operating companies so.
That's a better the reason the shift, but we think the quantum of opportunity is that we've underwritten to internally is absolutely still there.
And just one last follow up.
Has it back over.
As we look at the Capex range can you just highlight maybe why you think that that range is still makes sense.
So where we are in the down cycle versus.
Perhaps reducing your leverage incrementally is it just your belief that we're bottoming out here in 2425 are going to have a lot of opportunity. So you want to you want to be prepared for that or is it more around the maintenance capex side of things, where you want to get cost out of the fleet.
Yes, I mean, a lot a lot a lot of the capex for the large part of the Capex is to is to replace rolling stock.
And we take that we take that very very seriously I think companies that.
Try to kick the can on capex get into trouble, particularly when the cycle does inflect.
They're just they're just more disadvantaged and so a lot of the Capex. This year as we said our last call. We eliminated a lot of the growth Capex and so primarily what you are looking at is replacement Capex, which we've kind of fine tuned a little bit there is some capex in there for systems. There's some capex in there about $5 million of that Capex was pull forward for wind.
Which we expect to reflate towards the latter part of 2024 and given the lead time on those on those schnabel trailers of 18 plus months.
We wanted to go ahead and get that in there. So we we.
We think we think the Capex is right size relative to the opportunity set ahead of US we do think that the.
The market starts to come back in 2024, we do think where we've seen the bottom we're at the bottom nearing the bottom.
In 2024, depending on what the fed does I mean, I think there is there is there speculation that if the banking situation worsens you could see 100 basis points.
Of right unwinding this year, which we think is going to be a massive catalyst.
To the economy, especially the kind of the industrial.
Industrial complex, but if that ends up being kind of later next year.
Youre.
Youre going to Youre going to get the bank no matter, what we want to be well positioned to take advantage of that when the cycle does when the cycle does in flex. So that's how we're thinking about it.
Thanks, a lot Jonathan.
Thank you.
Okay.
Alright. Our next question comes from Ryan Macdonald from Craig Hallum Capital Group.
Yeah.
Guidance previously your guidance and your line is now open.
Thank you good morning.
Staying on guidance here so.
Obviously, you're guiding for revenue flat to up low single digits.
Said, one to two points lower rates.
Relative to your previous expectation, so I guess.
So simplistically that imply kind of flattish revenue, maybe down a little bit or walk through the puts takes on revenue. Please.
Yeah. Thanks, Ryan So our revenue guide is about 5% on an adjusted EBITDA range.
Youre guiding for revenue growth of 5%.
No I said were down 5%.
Sorry, I missed okay.
Yeah.
And then can you split that between flatbed and specialized.
Kind of expectations for there.
Yes sure Ryan.
Flatbed is down 11% and specialized is down 2%.
Given specialized has just one last follow up on that specializes hung in there a little better I guess does that assume kind of what we've seen in flat beds in a little more deterioration maybe flows through into specialized through the rest of the year relative to kind of.
Current environment.
Yes, it does.
As we look at across our sub verticals on on specialized.
They've held up pretty strong through the first quarter as excess capacity in the other markets are chasing fewer.
Fewer freight.
We expect to see some compression there is as capacity tries to enter some of those markets.
Last one from me.
Drivers I mean, it's been an ongoing battle felt it feels like for many many years kind of inflationary wages. There, but also just finding drivers I guess are you seeing any improvements there and I know you said kind of the cost side, it's a lag but any improvements on availability and then kind of timing on when we could potentially see some better wage.
Shneur I guess lower wage inflation on the driver side.
Yes.
We.
We've actually had a lot of a lot of quite a positive momentum on the driver side.
Our utilization is is probably approaching kind of 90%, 92%. So we're absolutely seeding trucks.
As you pointed out if you looked at if you looked at really kind of early 2022.
Late 2021, when the when the rate environment really kind of expeditiously and increased driver of driver pay was lagging and so historically for us driver pay as a percentage of.
Revenue was around kind of 32% to 33% it got as low as.
<unk>, 29% to 30%.
And it really at the kind of the peak rate environment.
And then really as rates started to inflect downward the back half of 2022, we're even starting to catch up. So we can kind of found our spine ourselves today, where wages as a percentage of revenue or closer to kind of 37 plus percent.
But we do think that we do think that the market environment is setting up for <unk>.
Look for an environment whereby driver pay can start to be walked down cautiously and carefully.
Non.
Kind of transport trucking nonfarm payrolls.
<unk> decreased in February , but they increased slightly backend back back up in March so they're kind of they are kind of hanging in there up three 2% kind of year over year.
So when you start to see that moderate and fall off that kind of that kind of gives you a sign that you're you've got excess driver capacity you can start walking.
Rates back so I think we're probably a quarter or so from from doing that.
Great. Thank you.
Yes go ahead on the CD.
They run on the seated truck count, we're seeing 1% to 2% pickup in and ceded rates, our overall truck counts up about five 5% to 6%.
On how you measure it through the quarter and so we are seeing larger recruiting classes. We are ceding more trucks, which we expect to continue to do through the remainder of the year.
Yes.
Great. Thanks.
Okay.
Our next question comes from Greg Davis at Northland Securities.
Thank you and I guess regarding.
Thank you <unk>.
What youre seeing in the market.
It sounded like it's mostly rate being pressured versus volume holding up relatively better.
Is that kind of what youre seeing in.
I guess similar question being how much of the weakening of rates as a function of the decline in demand versus maybe the increase in industry capacity.
Yes, I mean I think.
If you think about if you think about load volumes.
We'll stay on flatbed for a second just because it's.
Kind of bigger better higher.
The macro macro correlation.
In the southeast slab beds largest flatbed market for Firebird region in the country. So we'll stay there we're actually seeing pretty good pretty good loads are pretty good volumes. If you look though.
I'm pretty good as relative right. If you look at low detracts that that's kind of loaded truck.
Metrics over time.
If you look at if you look at 2018, which is pre pre COVID-19 when we get good times and then you look at Q1, so let's let's think about Q1 to Q2, because the movement from Q1 to Q2 is pretty pretty important here as a bellwether for how the rest of the year is going to be.
If you look at really Q1 to Q2 in 2021 Q1 to Q2 in 2018, yes, yes kind of mid 60 is going to.
And I'm not sure that number means anything to you or anybody listening in the call but 90.
As a kind of a frame of reference is really as good as it gets I mean, that's a massively massively healthy healthy environment, where you've got you've got substantial excess capacity and great great great coverage relative your trucking capacity 2022 Q1 to Q2.
It went from 90 down to $55 55 by all accounts is an extremely healthy environment, but you're starting to see you're starting to see a signal in that Q1 from Q2 loaded truck went down.
And then a few a few months later, you're starting to see pressure on contract rates.
And continued pressure on spot rates, if you look at where we're at in Q1 of this year.
We're in the teens, okay. The last time, we were in the teens.
Does Q2, 2020 nadir of kind of the Covid COVID-19 environment, right, where everything everybody thought the world is going to shut down the last time, we ran it before that.
Was was kind of mid 2019, when we had our our last freight recession right. So if you look at if you look at where we're at relatively.
The companies we have the brands we have the teams we have finding freight theyre doing a great job and if you look at I think what separates us maybe from relative to relative to some of the smaller carriers. It's the customers that we engage with the market the absolute size of the market, whether it's steel lumber steel pipe and tubing building materials those markets are absolutely contracted but what our customers are.
Our investment grade customers are doing is they're using as an opportunity to take market share. So there are actually hanging in there okay on a relative basis, but historically speaking.
The low debt ratio is extremely low utilization rates are low, which with which means you got excess capacity and so again you typically see those things tick up from Q1 to Q2, and we're just not we're just not seeing that any any way shape or form.
Okay.
I appreciate the color there.
Wanted to apologize if you addressed already kind of your plans here, but noticed it was adding 15%.
Drivers in the tractor fleet year over year in this quarter.
How do you maybe expect that to trend throughout this year, just following that kind of softening in demand.
Yes.
Greg can you repeat that question. Please.
Oh, Yeah, just regarding I think it was year over year, you added 15% to drivers in the tractor fleet.
Basically just wondering how youre expecting that the trend throughout this year, just given the softening in demand.
Yes.
I think theres, a theres a bit of a there's a bit of a timing difference there I mean, when you think about our truck count.
A lot of our trucks a lot of our trucks that we had on order last year were delayed. So we ended up getting a big delivery of trucks at the end of last year and so we're in the process of kind of cycling through the seeding those in Q1 a.
A lot of those are largely see that now you start the disposition process as well so if youre looking at just truly truck out ticking up.
It's probably overstated in Q1 relative to where youre going to see for the rest of the year, we had assumed year over year that we'd have about 80 more driver 80 more trucks this year than last year.
And that utilization, we'd be able to see those trucks more so we would go from something that felt like kind of 86% to 87% seated truck last year to something that felt like 90% to 91% ceded this year and so that's those are the.
Actions that are going to play through and again as we mentioned on the comments with <unk>. We're seeing the driver side of the equation is absolutely healthy we're seeding those trucks.
Probably in certain off Jos.
A little bit ahead will substantially ahead of plan right and some of the some of those off because we've got 7%.
76% to 7% on seeded so they actually need more trucks.
So we're we're feeling pretty good about where we're at.
The other thing that Youre seeing Greg if you look at the if Youre looking at the press release in terms of company trucks is our intentional Swift switch and are our asset right model and so we're deploying more company owned trucks.
Deemphasizing brokerage deemphasizing, the owner operators and so we are getting some conversions of leach lease purchases to company trucks.
And so that's kind of.
Why you see the shift in our mix of our mode.
Okay got it thanks for that and I guess lastly, you already addressed kind of.
Wage driver wages, but I was just wondering if you could provide some color on maybe the other lower levels of inflation, you're seeing across some of the other big cost categories.
Yes.
We're still seeing on the up.
It kind of made the maintenance cost.
We're still seeing kind of kind of 2020% cost increases and that was probably off of 40.
<unk>, 40% cost increases in 2022, we're still seeing kind of 20% plus expectation of cost increases this year for kind of maintenance and repairs.
Tires.
About 40% last year I don't think its going to be another 40%, but we are in the process of meeting with with some of the tire vendors right now to figure out what those price increases are going to look like but again I think when you look at when you look at the inflationary headwinds we face.
Look it now kind of.
Kind of a CAGR on rates versus 2019, so kind of pre pre pandemic environment to today, you've had it kind of CAGR.
3%.
Rate increases right and when you when you CPI adjust that.
You haven't really shown any any any real any real rate improvement and you've got all of that all the inflationary headwinds to offset as part of that so it is truly kind of a perfect storm.
Okay makes sense I.
I appreciate it guys.
Thank you.
Yeah.
That concludes the question and answer session. Thank you for your participation today I will now turn the call over to Mr. <unk> for his closing remarks, Mr. Telco go ahead.
Thank you Micaela.
We're in a tough though we're in a trough looking up cycle turns in our industry are quick and substantial and.
So when the inflection comes our unique portfolio of brands and services with a network of 4800 tractors and 11000 trailers, we are well positioned to expand asset productivity increased revenues leveraged earnings growth and enhance shareholder value.
I'd like to thank our entire 4300 person team for their focus and dedication.
We delivered a strong first quarter, despite a challenging macro backdrop confirmation that we're more resilient and agile organization.
We remain diligent in our commitments to drive shareholder value through proactive balance sheet optimization and operational excellence.
You all for your time this morning.
Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Okay.
[music].